The Market

The S&P broke through 1,100 on Friday for the first time in a month, propelled by General Electric’s announcement that it would raise its dividend by 20 percent. According to Morningstar, as of the end of last week, the NASDAQ has erased its losses for the calendar year, while the S&P stands just below flat and the Dow has gained 1.47 percent since Jan. 1. For the week, the Dow gained 3.27 percent to close at 10,424.62. The S&P climbed 3.57 percent to finish at 1,102.66, and the NASDAQ increased 4.15 percent to end the week at 2,269.47.

Who Would Have Thought? – In the July 6, 2009, issue of Barron’s (i.e., just over one year ago), the magazine asked 10 leading Wall Street economists to predict where interest rates would be as of June 30, 2010. Eight of the 10 forecasted that the yield on the 10-year Treasury note would be at least 3.85 percent. Only two individuals believed that the yield on the 10-year note would be at or below 3 percent. The actual yield as of June 30, 2010, was 2.94 percent (Source: Barron’s, BTN Research).  

Can’t Retire – Forty-seven percent of Americans currently between the ages of 56-62 would run out of the funds necessary to pay for basic retirement expenditures if they retire at age 65 (Source: Employee Benefit Research Institute, BTN Research). 

Half and Half – There are 154 million Americans in the civilian labor force (i.e., either currently working or seeking work). An estimated 156 million Americans are either too young to work or are retired (Source: Department of Labor, BTN Research). 

WEEKLY FOCUS – Lose a Tax, Gain a Tax 

Last week, we looked at the impact the lapsed estate tax potentially has on the estate of George Steinbrenner – and the loss of revenue it represents to the government. But rarely does the tax law giveth without also taking away. The temporary repeal also took away a law that actually reduced red tape for heirs.  

A provision called “step up basis” allowed heirs to calculate capital gains tax on the appreciation of the asset based on its value at the time of the benefactor’s death, rather than on the value at the time of the original purchase. For example, if your parent paid $50,000 in 1975 for a house that is today worth $200,000, the capital gains you pay when you sell the house is based on today’s value rather than the original value. So in five years, if the house sold for $250,000, you would pay capital gains on the $50,000 gain from the date your parent died, rather than on the $200,000 gain from the original date of purchase. (This example is incredibly simplified – there are any number of other factors that can affect the amount of capital gains tax.) 

The current law does allow the executor to increase the basis for certain property by $1.3 million, and property passing to a surviving spouse can be increased by another $3 million. Certain property cannot be increased, including retirement plans, IRAs, annuities, U.S. savings bonds, deferred compensation plans and uncollected installment sale payments. A number of other special rules apply, and executors who are also heirs may face unforeseen challenges in allocating the basis increase to specific assets. One of the biggest headaches, though, will be establishing the original cost basis on assets purchased decades ago. Your parent likely still has the papers on the purchase of the house, but does he or she still have statements or confirmations for the 500 shares of IBM? 

These issues may or may not warrant changes to a person’s will or estate plan, although if you expect to inherit assets before the end of the year, you may face some unexpected tax consequences. We can meet jointly with your accountant and estate attorney to determine how best to mitigate any unforeseen liabilities you may encounter. Please call our office at any time for assistance or to schedule a meeting. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific

Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305936

  

The Market

A decline in the number of new unemployment applications for the third week in the past month could not offset a lower-than-expected consumer sentiment reading and a decline in the consumer price index. The Labor Department reported Thursday that new unemployment claims for the week ending July 10 dropped to their lowest level since August 2008. The Thomson Reuters/University of

Michigan consumer survey fell far more than expected to 66.5, from a revised June reading of 76.0. The Consumer Price Index fell 0.1 percent in June, a weaker reading than economists’ prediction of no change, according to Reuters. For the week, the Dow lost 0.95 percent to close at 10,097.90. The S&P fell 1.20 percent to finish at 1,064.88, and the NASDAQ declined 0.79 percent to end the week at 2,179.05.

Cut In Half – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.57 percent on July 8, 2010, half of the nationwide average of 9.15 percent from January 1995 or 15½ years ago. (Source: Freddie Mac, BTN Research).   

Not A Baby Anymore – “Baby Boomers” are traditionally defined as the 78 million Americans born between 1946 and 1964. The oldest “boomers” will turn 65 years old in 2011 (Source: BTN Research).  

Not Enough Tenants – The national vacancy rate for apartments was 7.8 percent as of June 30, 2010, down from 8 percent as of March 31, 2010. The first quarter vacancy rate was the highest level achieved in the past 30 years (Source: Reis Inc., BTN Research).   

WEEKLY FOCUS – Reason to Rally a Retroactive Estate Tax? 

With the potential loss of an estimated $500 million in taxes on the estate of George Steinbrenner, the New York Yankees baseball owner who died on July 13, the Senate may be wishing it had worked a little harder to pass a bill last year that would have extended the 2009 rates rather than letting the tax expire in 2010. 

In fact, two days after Steinbrenner’s death, two senators introduced a proposal to permanently set the estate tax rate at 35 percent, with a $5 million exemption indexed for inflation and phased in over 10 years. The bill would also provide a “stepped-up basis” for inherited assets, meaning capital gains on future sales would be taxed on the value of the assets at the time of the owner’s death not the original value when the owner purchased them. 

If Congress takes no action, the federal estate tax in 2011 will be 55 percent and a $1 million exemption. The 2009 rate was 45 percent with a per-person exemption of $3.5 million. Applying 2009 rates to Steinbrenner’s $1.1 billion estate (as estimated by Forbes magazine), his heirs may have forfeited almost $500 million in taxes. Even without a current estate tax, Steinbrenner’s heirs must pay capital gains tax when they sell their inherited assets. Using the current top capital gains rate of 15 percent, if his heirs sold the assets immediately, they would pay about $165 million (depending on how much the assets have appreciated since Steinbrenner bought them). 

That’s a difference in tax of about $328 million – or, as the Associated Press put it, about 10 times Alex Rodriguez’s salary of $32 million.  With so much about uncertainty around the estate tax, many Americans are finding it difficult to plan their legacy. We welcome the opportunity to help you analyze your current situation in conjunction with your estate attorney and tax professional. Please call our office to schedule a joint appointment. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305838

Market CommentaryFor the week of July 12, 2010 

The Market

The markets shook off the pessimism of the end of the second quarter with their highest weekly gains in almost a year last week. The Dow and S&P had their best weeks since July 13, 2009, while the NASDAQ had its biggest gain since Oct. 5, 2009, according to the Associated Press. Earnings reports begin Monday, with Thomson Reuters expecting an increase in second-quarter profits of 27 percent over last year. During the shortened trading week (markets were closed Monday, July 5, for Independence Day), no further negative news came from Europe, while

China decided to renew Google’s license to do business there. For the week, the Dow gained 5.35 percent to close at 10,198.03. The S&P rose 5.47 percent to finish at 1,077.96, and the NASDAQ increased 5.00 percent to end the week at 2,196.45.

 

Who Is Buying What – Foreigners bought a net $223.5 billion of U.S. stocks and bonds in March and April 2010 (i.e., the difference between the amount that foreigners bought in American securities vs. the amount that Americans bought in foreign securities), the second largest back-to-back monthly total ever recorded. This record amount may suggest confidence in the

U.S. economy by foreign investors. The government has tracked this data since May 1978 (Source: Treasury Department, BTN Research).     

Better Than Expected – The

U.S. government had anticipated that it would be able to borrow money through the sale of 10-year Treasury notes during the 2010 calendar year at an average yield of 3.90 percent. The yield on the 10-year Treasury note ended 2009 at 3.84 percent but had fallen to 3.10 percent by June 25, 2010 (Source: Office of Management and Budget, BTN Research).   

Billions – Using the Treasury Department’s projection of $3.72 trillion of spending, the

U.S. government is anticipating spending of $10.2 billion every day during fiscal year 2010 (i.e., the 12 months ending Sept. 30, 2010). There are 371 Americans (out of our total population of 310 million) that are worth at least $1 billion. One billion seconds is equal to 31 years, 8½ months (Source: Treasury Department, Forbes, BTN Research).     

 

WEEKLY FOCUS – Who Needs Your Social Security Number? 

Because Social Security numbers (SSN) are unique to each individual, many businesses have made them the method of choice for establishing identity on customer accounts. That’s why having your SSN makes it so easy for an identity thief to set up bogus accounts in your name – and why you should push back on businesses who demand it from you. 

Who really needs your SSN? Your employer and your bank or financial service company may require it to comply with federal law, and if you use Medicare or Medcaid, your doctor’s office will need your SSN to file claims for those charges. Beyond that, few others actually need your SSN. What they do need is some form of identification. A driver’s license, state-issued identification or passport is usually preferred, and some companies will ask for a second piece of ID to confirm your license. This can often take the form of a birth certificate, credit card bill, bank statement, pay stub or company security badge. Just make sure none of those documents contain your SSN. 

Be prepared to offer these forms of identification when you decline to give your SSN. You may be told that you cannot conduct business with the company without divulging your SSN. Ask for a supervisor – and keep asking, on up the chain of command until you find someone who understands the importance of guarding your SSN and agrees to accept other forms of identification. If that doesn’t work, consider paying cash rather than establishing credit or billing account – or find another company to do business with. 

On average, victims of identity theft spend 60 hours and $1,180 cleaning up the damage, according to the Federal Trade Commission. Take the first step in protecting yourself by giving your SSN only to those who truly – by law – need that

information. If you have questions about how we use and protect your SSN or when a requirement to provide your SSN is legitimate, please feel free to contact our office at any time. 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305716

The Market

The Dow continued its decline through this past Friday, its longest losing streak since October 2008. According to the Associated Press, employers added 83,000 jobs last month while analysts had forecasted 112,000. For the week, the Dow lost 4.47 percent to close at 9,686.48. The S&P declined 4.99 percent to finish at 1,022.58, and the NASDAQ dipped 5.92 percent to end the week at 2,091.79.

Get a Job – Thirty-nine percent of CEOs of large

U.S. companies say they plan to increase payrolls in the second half of 2010, according to a survey by the Business Roundtable. That’s the highest percentage since the second quarter of 2007. The recession that began in the fourth quarter of 2007 has cost the nation’s economy about 8 million jobs, with unemployment peaking at 10.1 percent in October 2009, according to the Associated Press. 

Stay Home, Save Money – A recent study by Genworth Financial found that the cost of in-home care is rising at a slower rate than the cost of care in a nursing or assisted living facility. Home care costs have risen just 1.7 percent in the past five years, while assisted living has increased 6.7 percent and private room nursing home care has increased 4.5 percent. In an earlier Genworth survey, 78 percent of respondents said they would prefer to receive care in their own home. 

Public Speaking, Outliving Savings and Death – The old saw about most adults fearing public speaking more than death may have a new twist. According to a recent survey by Allianz Life Insurance Co. of North America, two-thirds of boomers fear outliving their savings more than they fear dying. Unfortunately, that doesn’t seem to be motivating them to plan ahead. Thirty-one percent aren’t sure how much their retirement expenses will be and 36 percent said they have “no idea” how long their retirement income will last.  

 

WEEKLY FOCUS – Passing On Your Vacation Home 

The U.S. Census, currently underway, was intended as the basis for allotting congressional representatives in each state (and subsequently, representation for city, state and other government entities). In its current form, the census gathers much more information. For example, the last census in 2000 found Americans own more than 3.5 million vacation homes, often passed from parents to children. 

If your estate plan includes gifting or bequeathing a second home to your children, you may not be doing them a favor. Your heirs will be responsible for paying for maintenance, insurance and property taxes on a gift they may not use often enough to justify the ongoing expense. If you have multiple children sharing in the property, the decision to keep or sell can be contentious, especially if one child can afford the expenses and another cannot. 

Some parents may have the wherewithal to fund a trust specifically to cover the ongoing expenses of the home. Others, especially those already pressed to pay the mortgage on the second home, may want to consider a life insurance policy whose settlement can be used for property expenses. Another option is to specify in the will that the second home must be sold and the proceeds divided among the heirs. 

Some heirs may not want fixed assets or real estate of any kind, viewing it as not only a financial burden, but an emotional one. An adult child may cherish the memories of family time spent at a vacation home, but the realities of his life today may make it unfeasible to continue that tradition with his own children. Guilt ensues over paying upkeep on a property he cannot use or selling the vacation home his parents valued so highly. 

Before including a vacation home or other real estate in your estate plan, you should consult with your children about their willingness and ability to handle the ongoing financial responsibility. Our office can work with your estate attorney to help you examine your options and broach the often difficult subject of money with your heirs. Call us for a family appointment. As always, we are happy to include your accountant or attorney. 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305603

The Market

The Federal Reserve’s Open Market Committee ended its two-day meeting on Wednesday by leaving the federal funds rate unchanged at zero to 0.25 percent, where it has been for the past 18 months. The Fed’s statement about financial market conditions, which it described in April as “improved,” showed concern this time as it stated, “Financial conditions have become less supportive of economic growth on balance, largely reflecting of developments abroad. Bank lending has continued to contract in recent months.” Manufacturing activity has been increasing, however, and businesses are spending more, leading Fed Chairman Ben Bernanke to express confidence that the country will not face a “double-dip” recession. Markets will be closed Monday, July 5, in observance of Independence Day. For the week, the Dow dropped 2.94 percent to close at 10,143.81. The S&P declined 3.63 percent to finish at 1,076.76, and the NASDAQ fell 3.74 percent to end the week at 2,223.48.

Stocks Down, Bonds Up – Since 1976, the S&P 500 has had a negative total return in seven separate calendar years. In each of the seven years when the stock index was down, the bond market (using the Barclays Aggregate bond index as the benchmark) produced a positive total return (source: BTN Research).   

Summer Travels – Every 1-cent reduction in the price of gasoline saves Americans $3.4 million a day.  The national average price of gasoline peaked on July 16, 2008, at $4.11 a gallon. As of June 18, 2010, the national average price of gasoline had fallen to $2.72 a gallon (source: AAA, BTN Research).     

Where Did The Extra Hours Go? – The productivity of the average American worker over the 10 years ending Dec. 31, 2009, is up 31.2 percent or 2.75 percent per year. That means the workload that would have taken an average employee 40 hours to complete in 1999 in a single week can now be done in 30 ½ hours (source: Department of Labor, BTN Research).

 

WEEKLY FOCUS – Protecting Seniors From Scams and Swindles 

Like the financial markets, money scams run in cycles. Resurfacing last year was the grandparent scam, in which a caller poses as an elderly person’s grandchild in distress, usually involving an arrest or car accident while traveling in Canada. The “grandchild” asks the grandparent to wire a few thousand dollars and to please not to tell mom and dad. 

A recent survey by the Investor Protection Trust, an independent group that promotes investor education, found that more than 7.3 million older Americans – about one in five – has been swindled, with above a third of adults over age 65 saying they receive phone and mail solicitations for money or participation in money-making schemes. 

Adult children tend to be unaware of the prevalence of scams aimed at the elderly. In the same survey, only 19 percent thought their parents had been approached by a swindler. While most were confident their parents would tell them immediately if they lost money in a scam, 16 percent thought their parents would be too ashamed to tell, and 35 percent said they wouldn’t be able to determine a scam had taken place if their parent didn’t disclose it. 

Elderly Americans can be particularly vulnerable following the death of a spouse, particularly if the deceased handled the couple’s finances. Scams at this time often come in the form of callers claiming the deceased spouse had entered into a contract or agreement for services that the surviving spouse must now pay. 

Approaching elderly parents about their finances and their ability to continue making rational and informed decisions can be difficult for adult children. We can help by creating nonthreatening opportunities to help educate your parents about potential dangers and encouraging them to take steps now to prevent future problems. Call our office to schedule a multi-generational appointment.

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI#305496

The Market

The Dow posted a second straight week of gains in excess of 2 percent last week, its strongest two-week stretch since November 2009. The two-week increase of 5.2 percent placed the index almost halfway back to its 2010 year-to-date high that it reached on April 26. Over the weekend,

China announced that it would discontinue its

informal policy of tying its currency to the U.S. dollar, a policy that has bolstered its export prices while keeping imported goods expensive for its consumers. In other news, the Fed begins its two-day meeting tomorrow (June 22) and is expected to keep interest rates at historic lows. For the week, the Dow gained 2.36 percent to close at 10,450.64. The S&P rose 2.39 percent to finish at 1,117.51, and the NASDAQ increased 2.95 percent to end the week at 2,309.80.

The Money Companies – The 79 stocks in the S&P 500 that are “financial” companies have tripled in value (i.e., increasing 206 percent from $523 billion to $1.598 trillion) from the close of trading on Monday, March 9, 2009, (i.e., just over 15 months ago) to the end of Friday, June 11, 2010. Over the same 15-month period since the bear market bottomed on March 9, 2009, the S&P 500 stock index has increased only 61 percent. Both return calculations do not include the impact of reinvested dividends (Source: S&P, BTN Research).   

Up Or Down – Since 1950, economic expansions have lasted six times as long as economic contractions. Economic expansions are defined as “trough to peak” periods, and economic contractions are defined as “peak to trough” periods. The average expansion has lasted 62 months while the average contraction has lasted 10 months (Source: National Bureau of Economic Research, BTN Research).    

Be Careful – Revolving credit, which includes credit card debt, fell in April 2010, its 19th consecutive monthly decline. This total peaked in September 2008 and has fallen every month since then (Source: Federal Reserve, BTN Research).        

 

WEEKLY FOCUS – Control Your Legacy with a Private Foundation 

If your calendar has filled with worthy causes seeking your name and your wallet, consider channeling your time and money into a private family foundation. 

Private family foundations aren’t the sole domain of the Gates, Fords and Rockefellers. The estate planning industry’s rule of thumb says a foundation needs an annual minimum of about $25,000 from endowments, annual contributions or both available for making grants. This may be prohibitive to estates under $2 million, but you certainly don’t need the billions of dollars that Bill and Melinda Gates have put into their foundation. 

You can establish a stand-by foundation, which is created to receive lifetime contributions or a major bequest, or a flow-through foundation, which converts appreciated property into cash and distributes the proceeds to public charities but does not build up an endowment. A flow-through foundation can provide capital gains tax benefits if you have highly-appreciated assets. Individuals may deduct cash and property contributions to a private foundation up to certain limits established by the tax laws. All contributions specified in a will are fully deductible for estate tax purposes. 

Your foundation can be a non-operating foundation, meaning it makes grants to help fund the efforts of other organizations or individuals, or an operating foundation, which runs a facility or institution, such as a museum or research lab. Your foundation’s purpose can be as broad as world hunger or as specific as modest scholarships to a local liberal arts college. Tax laws require private family foundations to distribute a minimum amount of assets each year and pay tax on investment income. However, as part of an overall retirement and estate plan, a private family foundation decreases the amount of taxable assets in your estate. You can make gifts to your foundation without affecting the annual gift tax exclusion or the gift tax credit. 

Creating a foundation requires careful consideration and planning. We can work with your legal counsel and tax advisor to see how a private family foundation could work with your retirement and estate plans. If you’d like to learn more about establishing a private family foundation, please call our office. 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305427 

 

The MarketThe

U.S. stock market rose on Friday as investors focused on upbeat consumer sentiment rather than the unexpected drop in retail sales in May. The Dow logged its first winning week in a month. For the week, the Dow gained 2.90 percent to close at 10,211.07. The S&P rose 2.57 percent to finish at 1,091.60, and the NASDAQ advanced 1.10 percent to end the week at 2,243.60.

Very Low – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.79 percent on June 3, 2010, just 0.08 percent higher than its all-time low. From January 1978 to September 1991, the average interest rate nationwide on a 30-year fixed rate mortgage never got below 9 percent (Source: Freddie Mac, BTN Research).   

On The Job – Employers in the

U.S. hired 431,000 new workers in May 2010, the fifth consecutive month in which more jobs have been added than have been lost. In January, 14,000 new jobs were added, followed by 39,000 new jobs in February, 208,000 new jobs in March, 290,000 new jobs in April, and finally the 431,000 new jobs last month (Source: Department of Labor, BTN Research).    It Happened In June – During the past four years (i.e., 2006-09), the highest yield achieved by the 10-year Treasury note in each of those years took place during the month of June. The 2006 peak yield took place on June 28, the 2007 peak yield took place on June 12, the 2008 peak yield took place on June 13, and the 2009 peak yield took place on June 10 (Source: Treasury Department, BTN Research).    

 

WEEKLY FOCUS – Back Up Your Back-Up Plan With Comprehensive Support 

The problem with things that have never happened before is that, well, they’ve never happened before. Even when we create contingency plans, situations or events can come along that upset not only the apple cart, but also the horse. 

On May 7, the stock markets experienced a significant one-day decline. Hindsight review pointed, at least in part, to the New York Stock Exchange’s (NYSE) “circuit breaker” rule that automatically pauses trading for five minutes when a company’s stock price fluctuates 10 percent in either direction in five minutes or less. In theory, it sounded like a good way to prevent volatility. The problem was that other exchanges didn’t have the same rule, so when the NYSE halted trading on those stocks, traders turned to the smaller exchanges, whose systems, with no price coming from NYSE, automatically set the price at 1 cent. Now the SEC has established circuit-breaker rules for all

U.S. exchanges, according to a June 11 article in USA Today. 

The BP oil spill will go down in history as not only one of the largest, but also as the perfect example of failed (and untested) backup plans. These two examples provide lessons for investors. In the case of the stock exchanges, it took only about five weeks for the SEC to identify what went wrong, suggest a solution, open it to the industry for comment and stage a test. In contrast, BP’s spill happened in April, and the company still hasn’t managed to shut it down. Granted it’s easier to stop trading on a computerized stock exchange than it is to control a pressurized flow of oil into the ocean, but in some respects, it’s about the contingency planning, access to data, quick analysis and decisive action. 

Investors benefit from the same contingency planning, access to data, quick analysis and decisive action that an independent financial advisor can provide. Faced with unexpected situations, whether a personal crisis or a market decline, you need someone who has all the background

information on you and your finances, plus all the industry data and tools. You need a plan, a contingency plan and immediate help if an event puts both of those in a tailspin. We can be that help. Call our office to schedule an initial consultation or review for your financial plan.   

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305315
–>

The Market

Another potential European debt crisis and a disappointing May jobs report took the Dow down more than 324 points Friday. The

U.S. added fewer jobs than expected last month, with most new hirings being temporary positions with the U.S. Census. Earlier in the week, economic reports showed a continued but slow recovery. The service sector index showed slight growth, while

U.S. factory orders increased in April on demand for aircraft. In Europe, a Hungarian official said the country may suffer a crisis like that of

Greece. The euro fell to a four-year low against the dollar, according to Reuters. For the week, the Dow lost 2.00 percent to close at 9,975.28. The S&P fell 2.22 percent to finish at 1,070.15, and the NASDAQ declined 1.68 percent to end the week at 2,231.26.

 What We Save – The national personal savings rate in the

U.S. was 1.7 percent in August 2008 (i.e., before the 2008 global financial crisis), then rose to 6.2 percent in May 2009, but has now fallen back to 3.6 percent in April 2010 (Source: Bureau of Economic Analysis, BTN Research).   

Need to Do More – One in four American workers surveyed (25 percent) admits that he or she is “significantly behind” in the accumulation of assets necessary for his or her eventual retirement (Source: MetLife Mature Market Institute, BTN Research).   

Money Coming Back to Us – The $700 billion TARP legislation (Troubled Asset Relief Program) that was signed into law by President George Bush on Oct. 3, 2008, included $245 billion that was paid to

U.S. banks. Through March 2010, $168 billion of the $245 billion (or 69 percent) has been repaid by the banks (Source: TARP, BTN Research).   

 

WEEKLY FOCUS – Creating Your Own Job 

The economy hasn’t been kind to older workers. Recent data from the AARP Public Policy Institute showed more than two million people age 55 and older were unemployed and looking for work in April. Although the overall unemployment rate for this group is slightly lower than the national average, older workers are often unemployed longer. 

With existing jobs scarce, many 55+ workers are creating their own. In a CareerBuilder.com survey taken in February and March, a third of workers in that group who had been laid off within the past year and had not found a job said they plan to start their own business. 

Becoming a business owner later in life has its advantages: You have skills and experience you may be able to market on your own. You also have the benefit of observing gaps in your industry that a small business could fill. And unlike younger entrepreneurs, you have greater financial resources at your disposal – which is why starting a business in your retirement years holds greater risk than it does for those in their 20s and 30s. You have less time to financially recover should your business fail. 

A thorough business plan and a retirement plan can allow you to fulfill your dream without betting the farm. Both plans need to consider best and worst case scenarios. Your business could succeed wildly, creating unforeseen tax, estate planning and succession issues. Or it could fail, creating a whole different set of problems. Your plans should set some automatic action points – the point at which you would sell the business at its peak value and the point at which you would pull the plug. 

Our office can work with your attorney, business accountant and insurance professional to help you plan your course of action. You may also want to consider finding a mentor with business ownership experience, preferably in your field, through programs such as SCORE and the

Small Business Development Centers. For more on these and other services for entrepreneurs, go to the Small Business Administration (SBA) website at www.sba.gov. 

Pave your path to business ownership with thorough, comprehensive planning. Call our office today to get started. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305192
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The MarketConcerns about European credit resurfaced Friday as Fitch Ratings lowered its rating on

Spain’s debt. According to the Wall Street Journal, traders and analysts have become less concerned about a series of defaults among European nations and more concerned about a long recovery for the euro-zone economy. In the

U.S., personal spending remained flat in April, according to the Commerce Department, although personal income rose 0.4 percent. Consumer-sentiment levels rose slightly in May, according to the final index report from Reuters/University of

Michigan. For the week, the Dow lost 0.47 percent to close at 10,136.63. The S&P rose 0.22 percent to finish at 1,089.41, and the NASDAQ increased 1.26 percent to end the week at 2,257.04. 

 

They Like Us – Foreigners bought a net $140.5 billion of U.S. stocks and bonds in March 2010 (i.e., the difference between the amount that foreigners bought in American securities vs. the amount that Americans bought in foreign securities), the largest monthly total ever recorded. The previous monthly high was set in May 2007. This record amount may suggest confidence in the

U.S. economy by foreign investors. The government has tracked this data since May 1978 (Source: Treasury Department, BTN Research).     

A Billion Dollars a Day – Retail sales to American consumers in April 2010 totaled $366.4 billion compared to $336.7 billion in April 2009, an increase of $29.7 billion. That’s equal to $1 billion of additional retail sales per day in April 2010 when compared to the same month in 2009 (Source: Census Bureau, BTN Research).  

And They’re Healthy – An average American couple both age 75 and in good health would need to have set aside $265,000 (i.e., a present value amount required at age 75) to pay for future healthcare costs that they will incur including any long-term care assistance (Source: Center for Retirement Research at Boston College, BTN Research).   

 

WEEKLY FOCUS – Half-Time Check with Your Financial Coach 

If you look at one year as a single game of finances, we’ve reached half-time. Time for a pep talk from your financial coach, a check of your goals and possibly some game plan adjustments for the second half. 

Retirement: Have you kept your resolutions for paying yourself first by adding to your retirement accounts? If you’ve received a raise and haven’t done so already, consider increasing your 401(k) contribution or having your employer direct deposit the extra into your investment account for IRA contributions. Same is true of any bonuses, tax refunds or other windfalls. Choose saving or paying down debt over consumption. 

Spending: If you resolved to curb your spending, take time to check yourself and see if you’re still on budget. That bit of drift that may have started earlier in the year could have escalated to unacceptable levels. Rein it in now, before you get out of control, and you’ll find yourself more flush when you need it – like when the holiday buying season arrives. 

Credit: If you haven’t done so in the past 12 months, request your credit report. You get one free each year. Read through it for errors and suspicious activity that might indicate potential identity theft. 

Cash Reserves: Do you need to make home repairs or improvements? Will you be paying tuition or fees for children or grandchildren’s education and activities in the fall? Is there a charity event coming up to which you’d like to make a good-sized donation? How much cash are you going to need for these kinds of items in the next six months? Plan now how you’ll fund those needs while still maintaining an emergency fund for the ones you aren’t expecting. 

Taking stock of your performance in your financial game can help ensure you make your goals before time runs out this year. Call our office for a half-time review and pep talk! 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 305089 

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